Tips for Buying a Foreclosed Home

July 22, 2016

If you’re in the market for a new home, you’ve likely noticed some of the good bargains you can get on many foreclosed listings. These properties are sometimes half the price of similar homes in the market. With that kind of deal, who wouldn’t consider buying ?

Before you buy a foreclosed home, however, think twice. Though it may sound like a great deal, there are certain factors associated with buying a foreclosed home that you need to think about first to determine if it’s something you’re willing to tackle.

Foreclosed homes are homes that have been taken back by a lender or bank after a previous owner became delinquent on their mortgage payments and failed to comply with the terms of their loan. Depending on how long a foreclosed home remains vacant, it can fall into serious disrepair that will require a lot of money and time to return it to a livable state.

Therefore, it is crucial that you consider these tips before signing on the dotted line:

Have realistic expectations. Not only will the property likely be in some disrepair, but the process for purchasing a foreclosed home can be lengthy. When you are dealing with banks, there can be delays, so a foreclosed home may not be the right option for you if you are looking something you can move into quickly.

Expect “what you see is what you get.” Always see a foreclosed home in person before you place an offer. Oftentimes the pictures in the listing are outdated, and it is important to see the current state of the property after it has been vacant for some time. Many owners stop maintaining their houses when they know the bank is going to take them away, so don’t expect a sparkling clean home. Lenders sell foreclosures “as is”, so don’t expect them to contribute to the cost of repairs.

Set a budget for extensive repairs. Even if you can afford the purchase price of the house, you must always have a buffer of funds for repairs. Most foreclosed homes are in need of a thorough overhaul.

Know the history. Research more about the place before you decide to move forward with purchasing it. Check public records to see if there are any liens against the property. Ask the neighbors what happened and if they know the people who previously owned the house. Basically, get a feel for the story.

Look around. Is it your ideal neighborhood? The house alone may be an attractive opportunity for you, but always consider your surroundings when it comes to buying a home. Not only is this important for your daily living, but it also has an impact on resale value.

Have the house inspected. Hire a professional inspector to make sure the house is structurally sound and that it’s basic systems like electrical and plumbing are functioning. Even if you are fine with repairing big projects, this will at least let you know what issues exist, so you can determine if your resources are sufficient.